Energy Sector Policy Highlights
Author: Ernest Lyatitima Mate
11 November 2022
The New Dawn administration has set ambitious policy objectives for the energy sector that will require both policy certainty and private capital. This comes after a 10-year period during which, despite some initial big wins including increased private participation, the policy direction became unclear; and this manifested in continued load-shedding and public debate over rising fuel costs.
Electricity subsector highlights
In the Eighth National Development Plan (“8NDP”) the government plans to increase electricity generation capacity to 4,457 megawatts (“MW”) by 2026 from 3,307 MW in 2021. Currently, the country has excess electricity generation capacity following the commissioning of the Kafue Gorge Lower Hydro Power Station. This has enabled Zambia to increase exports of electricity to the Southern Africa Power Pool worth over USD 100 million during the first half of 2022. The 8NDP also announced plans to streamline Zesco’s operations to promote efficiency and sustainability.
Generation projects to look out for include Maamba Collieries’ expansion to 600 MW; and the 2,400 MW Batoka Gorge Hydroelectric mega-project. In the off-grid space, the government plans to continue to implement the Rural Electrification Master Plan and to increase the budget allocation to the rural electrification projects. Further, investments will be made to upgrade electricity transmission infrastructure to reduce transmission losses and promote electricity trade. Some key transmission projects to look out for include the Zambia-Tanzania-Kenya (ZTK) interconnector, Zimbabwe-Zambia-Botswana, Namibia (ZIZABONA) interconnector and an interconnector between Zambia and the Democratic Republic of Congo.
Petroleum subsector highlights
In the petroleum subsector, both the 8NDP and the 2023 National Budget announced plans to remove inefficiencies in the fuel supply chain by, among other things, supplying diesel through the TAZAMA pipeline. This is meant to reduce the cost of transporting diesel into the country, which is currently being done by trucks. Therefore, INDENI will no longer process feedstock but will play other roles in the petroleum supply chain.
Further, the Government has withdrawn from the importation and supply of petroleum products and this business will now be undertaken by the private sector. This is meant to provide business opportunities to Zambians to take part in the petroleum supply chain, create jobs and lower transaction costs by the elimination of middlemen. The Government also plans to ensure the maintenance of strategic reserves; and to promote the blending of petroleum products and biofuels to lower the cost of fuel.
Tax incentives announced in the 2023 budget for the energy sector include the following:
- standard rate the supply of petrol and diesel;
- reinstate Excise Duty on petrol and diesel;
- remove 15% Customs Duty on gas cylinders – to reduce the cost of Liquified Petroleum Gas (“LPG”) and thereby increase its accessibility by reducing the cost of cylinders;
- standard rate diesel or semi-diesel generators; and generators with spark ignition internal combustion piston engines; and cooking equipment that uses gas fuel;
- introduce Selected Goods Surtax at the rate of 5% on imported coal. The measure is intended to support the domestic production of coal and create employment to Zambians; and
- zero-rate Solar Batteries for Value Added Tax purposes.
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